Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

2 ETFs For Investing In Industrial Metals As Economies Recover

By Investing.com (Tezcan Gecgil/Investing.com )ETFsDec 18, 2020 09:37AM ET
www.investing.com/analysis/two-etfs-for-investing-in-industrial-metals-as-economies-recover-200548321
2 ETFs For Investing In Industrial Metals As Economies Recover
By Investing.com (Tezcan Gecgil/Investing.com )   |  Dec 18, 2020 09:37AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Wall Street has long been regarded as a forecasting tool. Recent positive momentum in equity markets across many sectors, including industrial metals, is possibly pricing in speedy global economic recovery.

In addition, many analysts expect robust US demand from infrastructure and construction projects under the incoming Biden administration.

Base metals, like aluminum, copper, lead, nickel, tin and zinc, are used extensively in a range of industries. Similarly, iron ore, a market where Australia dominates, is used in steel-making.

China has become the largest consumer of raw materials globally, fuelled by rapid industrialization and urbanization. For instance, recent numbers indicate:

"Government stimulus measures introduced earlier this year to fire up Chinas post-COVID economy have seen steel production, in particular, ramp up. The three-month period from July-September saw steel output in China ... rise by 10%."

We previously discussed several exchange-traded funds (ETFs) as well as mostly FTSE-listed global businesses that provide exposure to industrial metals and mining.

Here, we introduce two more funds that could be appropriate for investors who are expecting the global economic recovery to continue to drive industrial metals higher.

1. iShares MSCI Global Metals & Mining Producers ETF

  • Current Price: $36.82
  • 52-Week Range: $16.01 – $36.82
  • Dividend Yield: 2.31%
  • Expense Ratio: 0.39%

The iShares MSCI Global Metals & Mining Producers ETF (NYSE:PICK) provides exposure to companies that are involved in the extraction and production of diversified metals, aluminum, steel, precious metals and minerals.

PICK Weekly
PICK Weekly

PICK, which has 196 holdings, tracks the MSCI ACWI Select Metals & Mining Producers Ex Gold & Silver Investable Market Index. The fund started trading in January 2012 and has around $434 million in assets.

In terms of sectors, diversified metals and mining have the highest allocation (50.47%), followed by steel (33.15%) and copper (9.30%). The ETF includes many global names. Just over 25% of the companies come from the UK. Next in line are Australia (21.50%), the US (11.04%), Brazil (8.30%) and Japan (4.88%).

The top 10 names make up around 53% of assets in the fund. BHP Group (NYSE:BHP) (SA:BHPG34), Rio Tinto (NYSE:RIO), Vale (NYSE:VALE), Anglo American (OTC:NGLOY) and Freeport-McMoran (NYSE:FCX) lead the businesses in PICK.

So far in the year, the fund is up around 22% and hit a record high in recent days. The trailing P/E and P/B ratios are 12.35% and 1.56%, respectively. We like the diversification this fund offers as well as exposure to copper, which has been having a great year in 2020.

According to derivatives marketplace CME Group, since the great recession of 2008/09, “the copper market has generally assumed the role of long-term macroeconomic indicator,” and it has been referred to as “Doctor Copper in economics.”

Finally, shares of many of these mining companies would possibly appreciate in an inflationary environment that could come as a result of liquidity and stimulus provided by global central banks, including the Fed.

2. Invesco DB Base Metals Fund

  • Current Price: $17.83
  • 52-Week Range: $11.91 – $17.95
  • Dividend Yield: 1.55%
  • Expense Ratio: 0.84%

Our next exchange-traded fund is a futures-based commodity fund. The Invesco DB Base Metals Fund (NYSE:DBB) enables market participants to invest in commodity futures of aluminum, zinc and copper. Some of the assets are also held in US Treasury securities.

DBB Daily
DBB Daily

DBB, which started trading in 2007, tracks the DBIQ Optimum Yield Industrial Metals Index Excess Return index. Assets under management are around $165 million.

Year-to-date, DBB has returned over 17%. We believe the long-term bullish move in many of these metals may be in its early stages. The markets use the US dollar as the pricing benchmark for most raw materials and base metals. Therefore a decline in the greenback typically means higher prices for these commodities.

On a final note, futures of base metals are heavily traded in the London Metal Exchange (LME). Therefore, potential investors may want to keep prices as well as developments in LME on their radar, too. In 2012, the Hong Kong stock exchange bought the London Metal Exchange for £1.4 billion (or $1.9 billion). Put another way, China, which is the most important demand side of the equation in industrial metals, owns the most important exchange in base metals as well as its warehouses.

2 ETFs For Investing In Industrial Metals As Economies Recover
 

Related Articles

Tim Knight
If You’re Right…… By Tim Knight - Jun 28, 2022

I’d like to trot out our old friend IYR (real estate ETF) once again as a prospective short-sale candidate (or, in my case, long puts, as I did acquire those today). The little...

2 ETFs For Investing In Industrial Metals As Economies Recover

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Harold Ballz
Harold Ballz Dec 18, 2020 11:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
All the new electric cars coming out means a lot more lead is gonna be needed next year.
Orhan Tolu
Orhan Tolu Dec 18, 2020 7:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes , Metals will continue to rise in 2021.
Pawel Crovski
Pawel Crovski Dec 18, 2020 7:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
why ?
Pawel Crovski
Pawel Crovski Dec 18, 2020 7:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
why ?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email